Boston, MA 11/08/2013 (wallstreetpr) – Barrick Gold Corporation (USA) (NYSE:ABX) is not getting any breaks this year. The company owns the world’s largest gold reserves and is also the world’s lowest cost producer of Gold. In recent times, it has been hampered by falling gold prices as well as discontinued mine operations. The founder, director and Chairman, Peter Munk’s dream of becoming a diverse and mixed commodity miner had already ended in failure.
Falling bullion prices and the heavy debt load of about $15 billion necessitated the company to raise an additional $3 billion through sale of 163.5 million new shares at $18.35 per share. The company is having difficulty in raising the monies from the market as even on the day of the announcement, gold prices dropped. The company was planning to utilize part of the $3 billion to reduce its debt. But the additional shares would also lead to dilution by 16%, in effect; future profits would have to be shared with 16% more shareholders. The stock of the company is trading at $18.18 at the end of trading on November 7, 2013. The stock was trading at $20.50 on October 30, 2013 but plunged to $18.01 per share on news of the offering, the very next day.
Barrick Gold Corporation (USA) (NYSE:ABX) also has had to shelve the huge Pascua-Lama project on the borders of Argentina and Chile. More than 50% of the construction of the $8.5 billion project is already over, but the drop in gold prices does not make for economic sense to go ahead with the project at this stage. There are other issues related to legal and regulatory systems in Chile though the Argentinean side has lobbied for the project to be completed. The company had just salvaged another project in the Dominican Republic by agreeing on a 51% tax and royalty payment. This project was a joint venture between Barrick Gold Corporation (USA) (NYSE:ABX) and Goldcorp Inc. (USA) (NYSE:GG).
The news emanating from Barrick Gold Corporation (USA) (NYSE:ABX) is making investors very jittery and till it can get its act together, they will prefer to adopt a wait-and-watch approach.
